By T. Tsiros
[email protected]
Negotiations between the Greek government and representatives of institutional creditors are again expected to be “taxing” come the autumn, in the wake of the official end of the third – and last – bailout program extended by the latter to Athens – the current memorandum “signed and delivered” by the current Tsipras coalition.
The main item in upcoming negotiations will be the drafting of 2019’s state budget, with the now faltering “leftist-rightist” coalition desperately trying to stave off another round of social security cuts as of Jan. 1, 2019 – an austerity measure ratified by a Parliament majority in 2016.
According to reports, the Greek side wants to avoid the politically “painful” pension cuts in exchange for abandoning some or all of the countervailing measures that were agreed to with creditors, also in 2016. The finance ministry, reports state, is also willing to eschew a promised reduction in skyrocketing tax rates in order to keep pensions at current levels.
With a general election set for the second half of 2019 – barring the declaration of a snap election by the prime minister earlier – and with the already poll-trailing government coalition under sharp attack for its handling of a deadly wildfire late last month, the political “hot potato” entailed in implementing more social security cuts appears catastrophic for Prime Minister Alexis Tsipras and his ministers.
The mood in Athens took an even more negative turn this week on the heels of an IMF report noting that there was no margin for generating “super surpluses” in coming years’ budgets. As such, the Fund appears unwilling to sign off on hinted tax breaks for 2019.
As far as European creditors and partners (the ESM, Commission, ECB, Euro zone venue) are concerned , nothing officially has changed from the standing position that the Tsipras government must implement the reforms (pension cuts, a lowering of the annual tax-free income threshold) it has agreed to and passed into law.
The first post-bailout arrival of creditors’ auditors is set for the second half of October 2018, with final decisions expected before the tabling of the draft budget in Parliament on Nov. 20.
The Greek program will be on the Eurogroup’s agenda on Nov. 5.
Euro zone finance ministers will evaluate the course of the Greek economy and whether reforms are being implemented in order to approve the first disbursement to Athens of a 600-million-euro sub-tranche in returned profits generated by Greek bonds (ANFAs και SMPs) held by the ECB and Euro zone members’ central banks.
